Murder Insurance leads to Lawsuit and $7 Million Fine for Lockton Companies

America’s debate over gun ownership has proven very costly for one insurance brokerage. Lockton Cos. is facing a $7 million (£5.19 million) fine and a lawsuit over coverage it offered for members of the National Rifle Association (NRA).

The brokerage was criticized for selling “murder insurance;” because of a surplus-line policy it offered to members of the NRA, The Kansas City Star reported. The NRA is a controversial group of American firearms owners and advocates that engages in extensive political activism against gun control efforts.

Lockton had been offering $250,000 (£185,291.25) to $1.5 million (£1.1 million) in coverage for gun owners as part of the NRA’s Carry Guard program through its Lockton Affinity. Carry Guard is intended to protect NRA members involved in self-defense shootings from legal actions. The Lockton Companies is widely regarded as the world’s largest privately-owned independent insurance brokerage firm.

American Brokerages Accused of Issuing “Murder Insurance”

The Carry Guard Insurance became the target of a “Stop Murder Insurance” campaign organized by groups called Color of Change and Guns Down. The campaign demanded that Affinity and Chubb stop underwriting Carry Guard policies.

The groups contend that Carry Guard encourages “Stand Your Ground” shootings in which armed individuals open fire on people that they are afraid of. Such shootings became controversial in the United States after the shooting of African American teenager Trayvon Martin by George Zimmerman in 2012.

Critics claimed that Martin’s shooting was racially motivated. Zimmerman was legally entitled to carry a concealed handgun under Florida law. Legal experts have charged that Carry Guard encourages citizens to carry firearms because it protects policyholders from potentially ruinous legal expenses.

The Carry Guard coverage includes legal defense, firearm replacement, “clean-up costs,” and even bail for Stand Your Ground shooters, “Stop Murder Insurance” alleged. The NRA also operated a 24-hour hotline that offered legal advice for shooters.

“Lockton Affinity has notified the NRA that it will discontinue providing brokerage services for NRA-endorsed insurance programs under the terms of its contract” Lockton announced on Twitter in February. Lockton dropped the Carry Guard coverage after a mass shooting at Marjorie Stoneman Douglas High School near Miami in which 17 people were murdered.

Insurers Fined for Issuing Excess Line Insurance

Ending Carry Guard was only the beginning of Lockton’s legal troubles. Even more controversy and greater expenses followed.

Lockton Affinity violated state law by covering bail, attorneys’ fees, and investigation expenses for shooters charged with crimes, the New York State Department of Financial Services (DFS) alleged on 2 May 2018. The DFS fined Lockton $7 million (£5.19 million) for selling the policies in New York State between 2000 and 2018.

Illinois Union was fined $1.3 million (£960,000) for underwriting Carry Guard in a related settlement, The Insurance Journal reported. Illinois Union’s owner, Chubb, signed a settlement to the one Lockton entered into with the DFS.

The agreement Chubb signed prevents it from offering any line of insurance affiliated with the NRA, Insurance Journal reported. Illinois Union will have to give Carry Guard policyholders in New York State 90 days’ notice that is canceling the policies.

The fine was one of a number of actions, Lockton agreed to, in order to keep its license as an excess-line insurance brokerage in New York State, which contains New York City, a DFS press release indicates. Excess-line coverage offers policyholders access to specialized policies like the Cover Guard. No comment from the Excess Line Association of New York, a trade group for such insurers was available.

Lockton and the Illinois Union Insurance Company, a Chubb subsidiary, agreed to drop Cover Guard excess line coverage in a settlement with the DFS. That settlement led to a lawsuit from Lockton’s former business partner – the NRA.

Insurer sued for canceling “Murder Insurance”

To comply with the settlement, Lockton canceled 680 Carry Guard policies issued in New York State. The cancellation prompted the NRA to sue Lockton for violating a contract to offer the policies through 2024, The Wall Street Journal reported.

The NRA’s complaint alleges that the DSF is engaged in “a politically-motivated effort to deprive NRA members of insurance coverage.” The campaign was sparked by Everytown for Gun Safety, a gun-control group financed by former New York City Mayor and media billionaire Michael Bloomberg, the NRA claimed.

Sales of Carry Guard policies in New York ended in November 2017, when the DFS launched a probe of the coverage. The DFS investigation of Carry Guard is still underway and legal action against Lloyd’s which also underwrote Carry Guard policies is possible, The Insurance Journal reported.

It is not clear whether the Carry Guard policies are still in effect in New York State. The NRA website identified Illinois Union and Lockton Infinity as active Carry Guard underwriters in other US states on 3 May 2018.

“Murder Insurance” is a Political Issue

The DSF action and the NRA lawsuit are likely to have a detrimental effect on the excess-line market in the United States. Insurers are likely to stop offering coverage for politically-controversial products and activities – such as firearms and concealed carry permits. A concealed-carry permit is a special license that allows citizens to walk around with a hidden gun.

Lawsuits and regulatory action against issuers of Carry-Guard policies in other US states as the gun control debate heats up in the United States. Such suits are likely in the next few months because the next US Congressional election is scheduled for November 2018.

Democratic politicians are likely to make “murder insurance” an issue in order to attract the support of anti-gun voters. The “murder insurance” issue is likely to come to Washington D.C. next year – if anti-gun Democrats take control of the U.S. Congress in the upcoming election.



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